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10 Lessons Learned on Setting Up Business in Saudi Arabia

Updated: Aug 29, 2021

Due to its Vision 2030 plan, Saudi Arabia is highly welcoming investments from foreign companies. Because of that, many business owners are willing to set up a company in Saudi Arabia. It is a practical scheme of KSA to decrease its dependence on oil, shape its economy, and create a flourishing private sector.

However, some company owners are still thinking about how to start or set up a business in Saudi Arabia. Currently, MISA (formerly SAGIA) is the only way to set up 100% foreign-controlled companies. As of now, free zones do not exist in KSA, but discussions are going on about developing future Saudi free zones.

Foreign businesses tend to have an incredible enthusiasm for a Saudi free zone corporation because it will give them ultimate control of their company and mitigate other risks. In this article, we will talk about the ten most important lessons we learned while setting up a company in Saudi Arabia.

Requirements To Set Up Your Company In Saudi Arabia

First of all, let's get started with the basic eligibility criteria and documents needed to set up your company in Saudi Arabia as legal material.

Eligibility criteria

  1. The new entity in KSA should be acquired by a parent firm. The company can not exist as a single organization or one-person limited liability company (LLC)

  2. The corporation must maintain decent economic profits with no heavy losses.

Required documents

  • Audited financial statement of the last fiscal year

  • Trade license (or equivalent)

  • Memorandum of Association (MoA)

  • Notarized Power of Attorney (PoA) from a public notary

Lesson 1: Applying for MISA (formerly SAGIA) License

Acquiring the MISA Investor license is crucial because it will provide 100% foreign ownership of your company and the power to run it anywhere in Saudi Arabia. Based on the economic activity of your company in Saudi, the type of license varies depending on the International Standard Industrial Classification (ISIC). For the first year, the overall expense of the MISA license is SAR 12,000 (service fee included). After that, you need to pay SAR 62,000 for renewing the MISA license.

Lesson 2: Reserving company's name

We got to know that, in Saudi Arabia, the Ministry of Commerce and Industry deals with the company registration process. Generally, the reserved company name will be valid for about two months. After that, you need to repeat the naming procedure. It can be done in a single working day with no fees online.

Lesson 3: Drafting the local AoA and granting the CR

The drafted Articles of Association (AoA) of your business will be delivered to the Ministry of Commerce for inspection. Upon getting the clearance, your company will be certified as a legal entity in Saudi Arabia. It acts as a requirement for granting the Commercial Registration.

The Commercial Registration (CR) is a crucial document that contains the corporation's registration number, the dates, and the General Manager. Besides that, the CR will record the activities of your business, and they have to fall under the same license type. You must renew the CR every year with a fee of SAR 1,320.

Lesson 4: Registering and activating Chamber of Commerce (CoC)

Several government procedures and documents need certification from the corporation's Chamber of Commerce. You need to pay SAR 2,200 every year to renew CoC.

Even if a legal signatory with a PoA from the parent company signs the CoC account, it will be activated, a visit from the General Manager of the Saudi Entity to the Ministry of Commerce is needed to activate the CoC. From our experience of setting up over 150+ companies in Saudi Arabia, we can tell you that after the account is activated, you can complete nearly all of the CoC procedures online.

Lesson 5: Registering with Ministry of Labor and GOSI

A Saudi National is required to register for the Ministry of Labor (MoL) account, which is needed to hand out work licenses and other visas.

As you start a foreign business in KSA, you need to accept the Saudization law, which is regulated by the General Organization for Social Insurance (GOSI) every month. To be more precise, you must employ one Saudi national if your business has five or fewer employees. However, if your company has more than five employees, you should follow the Saudization Nitaqat system.

Another thing we learned is that the company needs to submit 12% of the Saudi employee's income to GOSI. Besides that, even the employees have to contribute about 10%.

Lesson 6: Getting a company location license

If you want to start a business in KSA, you need to have a real office address.

Lesson 7: Registering with General Authority of Zakat and Tax (GAZT)

We also have learned that the MISA entities are accountable for taxation in the Kingdom of Saudi Arabia. The VAT and Zakat registration should be done by an enlisted Certified Public Accountant. The Taxes include corporate tax, VAT and Withholding tax and vary from 5% to 20%.

Lesson 8: GM Visa and Iqama

The GM working visa is granted for a single time to enter Saudi Arabia. It can be altered into a re-entry visa and residence license (Iqama) after the GM passes the medical examination. The local company will register and obtain the work permit and Iqama. After that, the employee is legal to live and work in Saudi Arabia.

An Iqama card (Muqeem Card) is allocated to migrants who come to Saudi with a work visa. The tenure of the job is restricted to the total duration written on the work permit. As of now, this duration is one year for employment at private corporations. However, the permit can be renewed after one year.

Lesson 9: Registering with Muqeem and Absher portal

After getting the employee's Muqeem card, the corporation will enter it into their Muqeem portal. It allows re-entry visas to be granted and residence permit renewals. Besides that, the GM needs to be added to the firm's books and enlist with Absher, which will regulate the GM's records and services like passport, driving license, rent, and more.

In Saudi Arabia, Absher is the official e-Services mobile application, and it enables all nationals and inhabitants to use a wide range of governmental services.

Lesson 10: Opening a bank account

In addition, we learned that you must gather all the essential documents before trying to open a bank account. Banks have different working speeds and customer support. On average, a minimum of 1 working day is necessary to open a bank account. Although banks will advise the time frame of 3-5 working days to get an account open. A more realistic time frame in our experience would be close to 1 month.

Bottom Line

We learned a lot of new information while trying to start a company in Saudi Arabia. In general, the entire setup procedure is categorized into 16 different steps or 50+ steps behind the scenes. However, we’ve combined a few steps and created this article based on what we discovered from our experience to help you plan your expansion into the Kingdom. If you have any questions or would like to learn more about the process you can reach out to us for more information.

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